Merci Beaucoup Shop Talk: Pricing

Hands down, the question most asked of us in emails, on Facebook, in line for Space Mountain on a warm summer evening at Disneyland, everywhere people want to know why we are so awesome.  I can't answer that.  No one can answer it, we just are, but I can talk to you today about the real number one question of our fellow cakers, "how do you price a cake?" 

The answer is simple: there is no answer.  I know that is frustrating to hear, but we don't work in a consumer goods market like books or lawnmowers where there is standard pricing and a standard retail mark up structure to follow.  Although I believe the term "art" is overused in the cake world these days, essentially we are just that, artists, and as artists the value of our work is subjective.  What holds value to one client might not to another while another client might look at their wedding cake as the center of the show while another is just getting one to fulfill expectations.  There are so many variables that pricing can drive you completely bonkers!  

So what do we do?  Where do you start to solve this complex equation?  Here's some basic guidelines that have helped us through the years.

Know Your Market

In the past decade, there is not a single bakery or cafe or supermarket that Reva has passed by without going in to check on their operation.  These "spy missions" are commonplace in the food industry and you must be aware of what everyone else is doing in your area.  It will give you a good starting position to value your own work and to see what the market will bear.  And taste test while you're there!  If you try a $3 cupcake and you know yours is better, then you won't have a hard time (mentally) charging $3.50.

The Food Chain

If you are just starting out, then you have to accept your place in the industry.  A beginner has neither the skill set nor the reputation to charge what someone 10 or 20 or 25 years into the game can demand.  In the beginning, even the difference between two months and six months can be dramatic.  Your pricing can rise as you gain experience and prestige, as you get into magazines or even on TV.  I always equate this to the fashion industry.  There's nothing wrong with a Target brand outfit, but you'd pay more for a designer at a Rodeo Drive boutique wouldn't you?  Both might look good on you, but one has built up the reputation and hence the profit margin.  Don't under sell yourself, but definitely don't over sell!

Supplies

Talk about tough!  Not only do we have all the factors of value a client brings to the table, but the cost of our supplies is always changing too!  Stay on top of what it costs you to buy what you need to bake and decorate.  Eggs, dairy, sugar etc. has all gone up recently.  Price it out regularly, keep a chart on the computer and make sure you're not sacrificing profit because you didn't notice your milk budget doubled last month!  Also include cake boards, dowels, parchment and other expendables you will need to finish the cake.  Each cake will have a base price of supplies.  You don't have to be exact, but you will need an educated number.

X Factors

Do you deliver?  What's the price of gas?  How long will it take you to get there and back?  Will you charge more for "out of area" deliveries?  Do you have multiple cakes due at the same time and you'll need help?  Do you need to buy a new stand?  Is there a special order fondant color you need?  Do you need any new cutters or molds?  It is not necessary to pay for new tools with one cake, but you should know what will be going out money wise.

Time

Baking time will not change much unless you are upgrading your mixers or ovens in capacity, so that should be a pretty static amount of time.  Decorating is a "live & learn" equation.  As you progress, you will need to be aware of how long it takes you to stack, crumb coat, cover with fondant etc. etc.  Can you do a nice sugar flower?  How long.  Gumpaste buttons?  How long.  Fondant bows?  How long.  You need to know how long it takes you to do the design you're attempting.  10 hours or 40 hours is a big difference.  But remember, especially in the beginning, don't get frustrated with the how long, just know so you can better achieve the next step...

Now Value Your Time!!

I put two exclamation points up there because this is the most important step and the most difficult.  You have your base cost of goods, you know roughly how long you will need to finish the cake and get it to the event, now stay with me, we're about to go full math!  

Price - supplies / time = your value

Example 1:  You're being paid $500 for a cake that will cost you $100 in supplies and take you 20 hours start to finish.  500 - 100 = 400.  400/20 = 20.  Your time is valued at $20 an hour.  Is that what your worth?

Example 2:  $500 cake, needs a new stand, supplies are now $180 but with the support of the new stand stacking now takes less time and start to finish is now 18 hours.  500 - 180 = 320.  320/18 = 17.78.  You're time is now valued at $17.78 an hour.  Wait, weren't you worth $20?    What do you have to add to the price to get back up to your value or is adding the new stand making up for the "lost" dollars?

Example 3:  5 years later you are in a brand new shop and have been on the cover of Brides magazine.  You're Facebook page has 1000 fans and the local chamber gave you an award for being an asset to the community.  You're weekends are always booked.  A new client sees your cake from example 1 in your book and wants it for their wedding.  How much?  Well, times have changed.  Is your value twice as much now?  That's easy, maybe.  Assuming supplies are roughly the same, it's now a $1000 for the same cake.  1000 - 100 = 900.  900/14 (you're a much quicker decorator these days) = 64.29.  Wow, that's a little more than double your previous value!  You'd be happy with say $45 an hour, so you know you have some wiggle room if they're a nice couple on a tight budget.  Otherwise, your browsing Travelocity for that trip to Copenhagen!  You deserve a little mini break;)

See how that works?  Value yourself, and ultimately you are the only one who can decide on that value.  But always know, your time is absolutely valuable.  It goes way beyond supply costs and a few cups of sugar.  You're talent is what you're really selling here, be proud and objective, do not be greedy, just give yourself what you deserve!

The "Per Slice" Standard

The industry standard for pricing for wedding cakes is per slice.  Why?  Well, partially because it does allow us to break down the pricing in a way so that clients can see some math and understand the total cost.  You've got 100 guests?  It's this much.  240?  It's this much.  Homework: design and write up some cakes figuring out the overall total and how many it will feed.  Divide and see what your per slice will be.  Do this a few times for a few more example cakes and you will start to get an idea of where your per slice should start.  Notice I said "start."  I've done cake for $20 per slice and more depending on the decorations, but I have a base price (simple white cake with buttercream and one or two flowers) and that is how I start all conversations.  Try it, say it with me, "my cakes start at ____ per slice."  Then as the design grows, so can your pricing.

Also, know their budget.  You could spend half an hour designing their dream cake only to discover they've got $400 left to buy the cake and you just gave them a $2300 mega cake!

Never Justify!!

Remember how I said valuing your time was the toughest part?  I lied.  This step is by far the most difficult thing for young cakers to accept and implement.  Chances are if you're a cake maker, you are a people pleaser and you want to make everyone happy and you want to build your clients etc.  That's a good thing, but now you've stepped over the line from being the cousin who brings a cake to Thanksgiving every November to being a business owner.  You must maintain confidence and composure at all times and never be afraid to turn away a cake because you cannot agree on a price.  Set your value, know how far you can bend (if you really want to do the cake) and cheerfully suggest alternatives to them when they won't pay you what you need to be a successful business owner.  

Never descend into explaining how long it will take you and how much those eggs cost or any of that.  You're not a mechanic, you're a cake decorator.  You know what it will take, they don't need to.  If they respect your talent, they will understand, if they don't, cheerfully suggest an affordable alternative to fulfill their budget.  Helping someone is good customer service.  Undermining your value is bad business.  You are a business now, don't forget that.

Still not buying it?  Let me tell you what will happen if you start handing out what each element on your cake costs.  You will get a haggler who will pick at the design and try and reduce cost line by line and you will end up looking desperate as you try and defend your abilities and therefore, unprofessional.  You will also waste your valuable time in a consultation that is leading nowhere.  You're a business, not a charity.  You're a professional, not a beggar.  You will never build clientele by being a pushover.  You must present yourself as a professional.  Be friendly, be kind, have fun, but be firm and confident.  If you feel like you are talking too much, you are.  You don't need to justify.  Explain the design, tell them the cost, suggest alternatives if necessary, tell them the new cost.  "Is there any wiggle room here?"  "I'm afraid not, would you like a simpler design or a smaller cake?"  Be in control, be understanding, but be in control.  "Justify" takes you out of control.

Live Your Brand

You are selling you; your talent, your vision, your ability.  Live it, embrace it.  Believe in yourself and be confident.  If you price yourself too low and you realize it, raise your price.  

"The customer is always right" is an outdated business model, and especially for small businesses, can crush you financially.  You are presenting yourself as a professional and they are coming to you for professional services, hence your opinion and experience should carry more weight.  You'll fulfill requests, you'll follow their themes and desires, but it is your responsibility to guide them and offer your considerable experience to give them the best cake possible.  Results speak more to your business than delivering a buttercream cake to a notoriously windy beach where it will be covered in sand within 30 seconds just because the bride doesn't like fondant.  Fondant can be peeled off or eaten around, you know this.  Sand is forever!  You're the pro, explain this and they will be grateful for your help.

You are your brand and your brand is knowledge and talent.  I'm not telling you to get into arguments!  Just be firm and confident.  Once you set your pricing, live it, stand by it.

Phew!!!  I tried to make this as concise as possible but as you have just read, there is a lot to think about.  I know it seems daunting, perhaps more so than when you started this blog, but put some work in on the math in the beginning of your business and it will pay big dividends as you advance and grow.  Soon, pricing will be second nature, but don't be afraid to sit there with a calculator in those early consultations.  Best of luck cakers!  

Next Time on Merci Beaucoup Shop Talk: Consultation Do's and Don't's

Comments

[lisa]

wow reva! you really covered all of the bases. as a fairly "new" cake decorator (3 years), i agree with with what you said about pricing your time. it was very hard for me at first to "value" my time. now i have no problem charging for my time. as i get faster and better at my skill, i see my time value getting higher also. thanks for the advice. whenever i feel i charging too much, i'll read this!!! thanks, lisa

[Grace Goodwin]

Great advice! Thank you for your time in preparing that advice column...miss you on Amazing cakes!

[LaGonda Veal]

Thank you so much for this. I recently had someone ask me to make a cake for her husband's birthday. Half sheet cake with a dragon. She told me her late mother was a cake decorator and she appreciated all the work that went into a cake. I gave her a price with a 20% "friend discount". She said no way. Wanted me to practically give it to her. (former baby sitter of my grandson)The old me would have probably done it. But that's a lot of time and work. I am doing a tiered baby shower cake for a co worker. She gave me the details of what she wanted and I priced it. She didn't even blink. I deliver this weekend.

The thing I have found to watch out for is your family and close friends. They tend to want to take advantage of you.

Sorry I was so long winded.

LaGonda

[Jessica Alba]

Wow so exciting reading all this information. Very helpful.

[Rachel Smart]

Thank you so much for posting this! I've been making and decorating cakes for 5 yrs, but only recently started selling them. For one of them, I thought to myself, can I really ask for that amount with a straight face?", but in actuality, I'm not making much profit on it at all. This article was sooo helpful!

[Carla]

Reva - you are my hero. What a great article. I just had a run in with a lady the other day about price. I floundered a bit unfortunately because she made me feel bad. I will be thinking of this article next time and stand by my brand (me!). Thanks so much!

[Sabrina]

Fabulous post. Very true. When i started out I had a lot of those issues to deal with. In a very short time I got my 'guts' when dealing with pricing. Two main things helped me. When I had to determine a pricing above my base price, I would think "how much extra time is this going to me away from my kids"; "Would anyone go into the office of a doctor or dentist and haggle the price or ask for a discount?" When people order a cake they are paying for a product AND artwork. Price it accordingly. Plus there will be times when someone approaches you with a design to create but you'd much rather be catching up with laundry...so make it worth your time!

[Cindi Taylor]

Thank you so much for this blog topic. It is similar to what I have read on other advice blogs,but yours really made me understand what my daughter has been trying to hammer home to me for forever about my pricing! The way you stated your case for time value,self-respect and design pricing is truly helpful. I have the Cake Boss software for bakers and I need to use it! Thanks so much,Reva!